Kincora Copper’s rising share price suggests the market may be latching on to a potential shift in sentiment towards Mongolia, according to Proactive Investors. The company behind Bronze Fox, a copper project not far from Rio Tinto’s Oyu Tolgoi project, looks to have come a long way in just two months.
In November 106 exploration licences, including two of Kincora’s, were revoked following a criminal investigation into former government officials accused of illegally issuing the permits. The move dealt investor confidence a blow, raising questions about Mongolia as a foreign investment hub, but crucially it left Bronze Fox, Kincora’s flagship project, intact.
Encouraging recent comments from Mongolian officials, however, suggest a resolution to the licence dispute may be just round the corner and it is expected that companies which were stripped of their assets will be able to reapply for them once a decision is reached.
Kincora has seen its share price double so far this year, helped by such comments and prospective new mining laws this year, suggesting faith in the Kincora story is returning.
While its share price has been on the rise, the market capitalization is still less than Can$10 million, leaving plenty of work to be done to convince punters Mongolia is a viable investment region and Kincora is the company to invest in.
In a recent interview with ‘Emerging Frontiers’, an investment website focused on emerging markets such as Mongolia, Kincora’s chief executive Sam Spring said he believes Kincora is trading at around a 60% discount to its Mongolian peers. “There is an argument, due to the age, level of activity and results to date at Bronze Fox, that Kincora should trade at a premium.”
In its latest exploration update, the firm said it expects to have generated targets for potential drilling at Bronze Fox shortly. Recent results from two independent consultants have been particularly encouraging, it told investors.
“When we last issued options to management and the board we had no hesitation in our view that ‘par’ was 10.5c, the last private placement price and well above the price at the time, and that no one internally should be rewarded/in-the-money until that floor was reached,” Sam Spring stated.
“That said, the share price is still a reasonable way away from that price but I know a few retail shareholders see that as an important level/signal and this is obviously something we as a company want to get back to sooner rather than later but for the right sustainable reasons.”
On the recent buying activity, Sam Spring said: “To the best of my knowledge it would appear that in the last couple of weeks there has been both an element of new retail investors active in the market (helped by EBRD’s [European Bank for Reconstruction and Development] funding agreement for up to $10 million with Altan Rio, another Mongolian copper exploration play) and some averaging down in existing shareholders’ entry price.”
Rio Tinto’s Oyu Tolgoi copper-gold project is also emerging from the extensive wrangles with the government that have dogged its development so far and is ramping up to full production – expected to be 160,000 tonnes of copper a day. Talks over stage 2 financing are ongoing, but the initial signs are good, Sam Spring says.
Stage 2 financing for Oyu Tolgoi is “the largest and most needed catalyst” for a pick-up in foreign investment. Not only would it recapture the market’s attention, but it would prove the government is learning from its recent mistakes, he explains.
Sam Spring says a Chinese buyout, a new discovery or the resolution of the revoked mining licences would also renew interest in the region. “Those that have experienced previous similar cycles in Mongolia often comment that they see the current environment as entering a good opportunity given that most asset valuations are cheap, even on a risk adjusted basis, relative to other markets.”